Review your performance management system

Nearly every mid-size to large company in the world now has some kind of performance management system – a process that, in theory, should help people set and achieve goals that ultimately drive performance. Yet only 14 per cent of organisations are actually happy with their current systems, according to the industry research firm CEB. Despite that, so far only 3 per cent of companies are making any significant changes to how they manage performance. The rest are engaged in superficial tinkering: altering the number of goals being set, shifting from a three- to a five-point rating scale, and so on.

Mere tinkering isn’t enough. Research shows no link between changing the number of ratings people have, or altering the wording of those ratings, and any measurable impact on performance. It seems that we need to completely rethink our approach to managing performance.

Driving this need are seismic changes in demographics as well as changes in how work is structured today. Annual goals might have worked 20 years ago, but between new technologies and a rapidly changing economy, it’s hard for goals to be relevant for more than a quarter. Even quarterly feedback does little for younger generations craving to learn something useful every week from their boss. And consider the fact that most of the time, performance is only discussed with one manager – even when that employee is involved in a half-dozen emergent teams unrelated to his manager’s work.

The nature of work has become more relational and creative than ever, with a greater need for collaboration – which some performance systems accidentally inhibit.

The first step in any difficult change program is acknowledging that your company has a problem. To recognise that problem, sometimes it’s necessary to give your performance management system its own performance review. There are many ways to do this, but a very simple one is a five-point rating scale.

TIER ONE: NEEDS TO GO

Although your system showed promise during recruitment, it has turned out to be a dud. It has failed to achieve any company goals. Worse still, no one wants to work with it any more. It’s time to put this system out to pasture.

TIER TWO: NEEDS IMPROVEMENT

Related Quotes

Company Profile

Your system has personality issues. Despite achieving a few goals and having good technical skills, it often rubs people the wrong way. Employees complain about its inauthenticity, inflexibility and glaring blind spots. In short, the system is underperforming and needs a breakthrough soon if it’s going to prove it deserves to stick around.

TIER THREE: GOOD, BUT INCONSISTENT

Your system is like the wind in summer. Things fly along, then there are long stretches of nothingness, as employees wait around for something better – feedback of any sort, a career discussion, any puff of positive wind in their sails. You wish it raised performance more consistently throughout the year, but you can’t quite bring yourself to let it go because, sometimes, it works.

TIER FOUR: STRONG PERFORMER

Your system does a solid job most of the time. It gives employees the feedback they need to feel appreciated once in a while, and generally helps them understand how they can develop. While it’s not stellar, you’re happy with what you have and can’t see yourself firing this system any time soon.

TIER FIVE: TOP PERFORMER

Your system consistently motivates top talent, stretches mid-level performers and helps your low performers self-select out. When times are tough and bonuses are tight, it helps folks stay engaged for better times. Everyone who works with the system loves it.

How does your performance management system rank? If it is low, how long has it been at that level? Should you let it languish another few years on a low tier, hoping it will improve?

Remember: If you decide to rank your own firm, be sure to keep things confidential. No one likes internal feedback going public.

David Rock is co-founder of the NeuroLeadership Institute, a consultant and author of Your Brain at Work.